Probe: Utility head says it did not try to avoid price caps and didn't lie to investigators. E-mail alleging 'ricochets' appears to conflict with testimony, senator says.

SACRAMENTO -- Responding to allegations by a state senator, Los Angeles Department of Water and Power officials said Tuesday that they had not engaged in Enron-style electricity-trading strategies and had not lied about it to state and federal investigators.

"We testified truthfully," said the DWP's acting general manager, David Wiggs. "LADWP played by the rules and did not try to avoid price caps during the energy crisis or any other time."

The city-owned utility was reacting to allegations in a November 2000 e-mail from an electricity trader that warned fellow traders to "beware of ricochets with LDWP."

Sen. Joe Dunn (D-Santa Ana), chairman of a Senate committee that is investigating price manipulation of California's now-defunct power market, said Friday that the e-mail appeared to conflict with sworn testimony by DWP officials.

In their testimony, officials of the department told Dunn's committee and the Federal Energy Regulatory Commission that the DWP had not engaged in the sort of power-trading schemes detailed by Enron Corp.

Market Manipulations

Traders for the bankrupt Houston energy company, in a December 2000 memo made public last month, described "ricochet" as a strategy to raise power prices by exporting electricity out of state and bringing it back in to California grid operators willing to pay high prices to avoid blackouts. Such a scheme could also circumvent price caps in California.

DWP officials say the term "ricochet" in the Nov. 12, 2000, e-mail obtained by Dunn's committee refers to a different sort of arrangement, one in which power moved on DWP's transmission lines never leaves the state. The e-mail was written by a trader with the unregulated power-trading division of PG&E Corp. to his colleagues.

It referred to a Nov. 11, 2000, transaction in which DWP helped to move power for PG&E National Energy Group from Arizona to Northern California for $1,250, Wiggs said.

"This deal was about helping a fellow utility bring much-needed energy into the marketplace and nothing more," he said.

Wiggs added, "We are obviously concerned when a key state official suggests representatives of the LADWP would perjure themselves under oath."

Hiding Ricochets

The e-mail by the PG&E Corp. trader warned that California grid operators were "savvy to LA's attempts to circumvent ricochets by showing an export and import of equal megawatts" on the California border "in order to hide the ricochet nature of the transaction."

PG&E Corp.'s National Energy Group turned over a copy of the e-mail after Dunn's committee asked for evidence that any other buyer or seller in California's power market might have tried to manipulate prices with methods allegedly practiced by Enron.

The PG&E Corp. subsidiary itself denied having engaged in such schemes.

Committee Vice Chairman Sen. Bill Morrow (R-Oceanside) has asked that officials of DWP and other municipal utilities appear at a hearing Thursday in Sacramento to "explain their relationships with Enron and allegations of market-gaming."

In a letter sent Tuesday to Wiggs, Dunn said DWP's attempts to describe the term ricochet as an accounting-type transaction "raise many concerns."

"It is peculiar that a group of traders at NEG would find it necessary to urge caution ... for an 'accounting-type' transaction," Dunn wrote.

Until DWP offers another definition, he added, "we stand by our concern that ricochet means ricochet."